Consumer protection is an article of faith for the Narendra Modi government. Consumers are the fulcrum of any industry, the protection of whose interests is central to its growth and development. Within one-and-half-years of assuming office, the Modi government enacted the Real Estate (Regulation and Development) Act (RERA), which had been in the works for more than a decade.
RERA has infused governance in a hitherto unregulated sector. Along with demonetisation and GST, it has, to a large extent, cleansed the real estate sector of black money. It has transformational provisions, conscientiously addressing issues which have been a constant bane for the sector. The Act stipulates that no project can be sold without project plans being approved by the competent authority and the project being registered with the regulatory authority, putting to an end the practice of selling on the basis of deceitful advertisements.
Promoters are required to maintain “project based separate bank accounts” to prevent fund diversion. The mandatory disclosure of unit sizes based on “carpet area” strikes at the root of unfair trade practices. The provision for payment of “equal rate of interest” by the promoter or the buyer in case of default reinforces equity. These and many other provisions have empowered consumers, rectifying the power asymmetry prevalent in the sector.
The negotiating history of this legislation demands that at some appropriate time, all the attempts made to derail this legislation be catalogued. After years of deliberations, the bill was introduced in the Rajya Sabha during the UPA’s tenure in 2013. It is essential to highlight the stark differences between the 2013 bill and the 2016 Act. This would help understand the commitment of the Modi government in protecting the interests of home buyers. The 2013 bill covered neither “ongoing projects” nor “commercial real estate”. The thresholds for registration of projects were so high that most projects would have escaped coverage under the law. These exclusions made the 2013 bill meaningless and detrimental to the interests of home buyers.
After the formation of the Modi government in 2014, a holistic review was carried out along with multiple stakeholder consultations and thereafter both “ongoing projects” and “commercial projects” were included in the bill. The thresholds for registration of projects was also reduced. Without the steadfastness and resoluteness of the PM, RERA would never have seen the light of day.
While the 2013 bill was pending in the Parliament, the Congress government in Maharashtra, which had quietly enacted its own law in the Assembly in 2012, took Presidential assent under Article 254 of the Constitution in February 2014, just two months before the 2014 general elections. In Maharashtra, RERA, therefore, would not have applied. The irony of the actions of the Congress at the Centre and in Maharashtra was not lost on anyone and constitutes a stinging indictment of the then UPA government at the Centre. The suspicion was further heightened when one sees that the state law was not consumer-friendly. For political gains, the UPA dangled an incomplete and incoherent law, while approving under Article 254 of the Constitution, its own party’s state bill, which would have caused permanent damage to the home buyers of Maharashtra. The Modi government corrected this anomaly by repealing the state Act vide section 92 of RERA. This was done by invoking the proviso under the same Article 254, which provides for powers of repeal.
Our commitment towards RERA did not end with its enactment. We faced a barrage of writ petitions, challenging its constitutional validity. In December 2017, the Bombay High Court upheld the law in its entirety, putting to rest any doubts about the validity, need and importance of RERA.
RERA is a seminal effort in cooperative federalism. Though the Act has been piloted by the Central government, the rules are to be notified by state governments, and the regulatory authorities and the appellate tribunals are also to be appointed by them. The regulatory authorities are required to manage the day-to-day operations, resolve disputes, and run an active and informative website for project information.
At the other end, in a glaring example of constitutional impropriety and poor governance, West Bengal trampled upon the supremacy of the Parliament by ignoring RERA and enacting its own state law — the West Bengal Housing Industry Regulation Act (WBHIRA) — in 2017. Despite multiple efforts by the Centre, West Bengal refused to implement RERA, causing irreparable loss to home buyers. Knowing full well that there was already a central law on the subject, the state government enacted WBHIRA in 2017, and did not even care to approach the President of India seeking assent for the state bill under Article 254. This defiance of constitutional principles has been challenged in the Supreme Court. I am confident that soon, WBHIRA will be rendered unconstitutional and we would have “One Nation One RERA”.
Since RERA came into full force, 34 states and Union territories have notified the rules, 30 states and Union territories have set up real estate regulatory authorities and 26 have set up appellate tribunals. The operationalisation of a web-portal for project information, which is at the heart of ensuring full project transparency, has been operationalised by 26 regulatory authorities. Around 60,000 projects and 45,723 real estate agents have been registered with regulatory authorities. Twenty-two independent judicial officers have been appointed to redress consumer disputes, and 59,649 complaints have been disposed-off.
RERA is to the real estate sector what SEBI is to the securities market. As I have always said, the history of urban India and of the real estate sector will always be remembered in two phases — “Pre RERA” and “Post RERA”.
This article first appeared in the print edition on January 20, 2021, under the title “Cooperate for the consumer”. The writer is a member of the Union council of ministers